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A warning issued to the UK has told how its credit rating may be cut, and could potentially harm borrowing costs in the future.

Moody's ratings agency issued a statement after concerns about the possible impact the eurozone crisis could have on the growth of the UK's.

The ratings agency placed the UK on "negative outlook", predicting a possible 30% chance of losing its current credit rating of AAA within 18 months.

It’s not just the UK that is suffering from credit rating doom and gloom, warnings have also been issued to France and Austria and Italy, Spain and Portugal's ratings have already been lowered.

Chancellor George Osborne has said that these comments from the US based agency were not intended as a criticism of his government's economic policy.

Speaking to the BBC, Mr Osborne said: "It was a reality check for the whole political system that Britain has to deal with its debts, that we can't waiver in the path of dealing with our debts”.

"This is yet another organisation - in this case a credit ratings agency - warning Britain that if we spend or borrow too much we're going to lose our credit rating," he added.

But the shadow chancellor Ed Balls viewed Moody’s statement differently, saying that it should be taken as a warning to the UK.

"Unless you have growth, if your plan is unbalanced it becomes self-defeating and today is the first evidence that even the ratings agencies are waking up to the fact George Osborne's plan is not working," he said.

"I have said consistently and in the face of the views at times of ratings agencies, that without growth, without jobs, you can't get the deficit down”.

Stephanie Flanders, the editor of economics at the BBC, said there was no suggestion that the agency wants the UK government to change its economic policy. But, the agency's warning means spending cuts may not prevent the UK from losing its credit rating if growth does actually fall in reality.

Moody's stated: "Any further abrupt economic or fiscal deterioration would put into question the government's ability to place the debt burden on a downward trajectory by fiscal year 2015-16."

The "growing financial and macroeconomic" risks from the eurozone crisis justified the downgrades, it said.

In a similar way to personal credit ratings, sovereign credit scores indicate the possible danger of lending money to a country.

If high credit ratings are reported by the main three agencies (these being Moody's, Standard & Poor's and Fitch), then it is implied that borrowing to fund public spending will be cheap. Lowering ratings can push up the interest rate on new borrowing for governments.

However, many analysts believe a fall in the UK's rating would have little effect as it would be relative to the other countries credit scores.

"We did see America being downgraded, they lost their AAA rating last year and that didn't have a huge detriment, in actual fact it was reasonably positive they are still seen as a safe haven when compared to other countries such as Greece and Spain, and I suspect Britain will be the same”, Laura Lambie from William de Broe said.

The "negative outlook" issued to the UK, is the lowest level of warning offered by the agency, followed by a "negative watch" with a 50% chance of downgrade.

The agency said that the UK faced three main risks to its current rating; slowing growth and the possibility of it impacting on spending cuts, a sudden rise in the cost of borrowing due to inflation, or a fresh wave of problems in the banking sector.

The good news is that the agency noted that the UK economy; "continues to be well supported by a large, diversified and highly competitive economy, a particularly flexible labour market, and a banking sector that compares favourably to peers in the euro area".

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Source: http://www.bbc.co.uk/news/business-17021986